Five tax efficiency tips for limited company Pilots
Promotional feature. Many Pilots at some point in their career consider working on a contract basis, which is often through their own limited company.
This means you are essentially your own boss, which gives you the added bonus of taking responsibility for your tax and finances. While this extra paperwork could be seen as a burden it does come with its advantages, the main one being that it may allow you to be more tax efficient and increase the amount that you take home. Heather Dore, Regional Manager at Easy Accountancy shares her five top tax efficiency tips for limited company Pilots.
Dividends are an alternative way for limited company directors to pay themselves out of the profits of their company. One of the advantages of dividends is that they provide greater opportunities for tax planning. Company profits are subject to corporation tax and once this has been paid you can take money out of your company as dividends. Dividends do not attract national insurance and as long as the dividend amount is below the tax threshold you will not incur any further tax on this money.
2. Take a small director’s salary
As a limited company director you may consider paying yourself a small salary of a similar amount to your personal allowance and then paying the rest of your salary by taking dividends. Your personal allowance is the amount that you can earn without attracting income tax and the amount will depend on your age and income. As an example, if you are under 65 and earn less than £100,000 per year your personal allowance for the tax year 2014/15 will be £10,000.
A business expense is a cost that is solely and exclusively for the use of your business and you can claim tax relief on some of these costs. As a limited company Pilot some of the costs that you may be able to claim as an expense include training, travel and uniform costs.
4. Have an executive pension
As a limited company director if you set up an executive pension then you can pay your pension contributions directly from the profits of your company. Pension contributions are eligible for tax relief and are generally paid pre-tax. It is always advisable to speak to an accountant for more information on how to set up a pension as a limited company pilot.
5. Have more than one shareholder
Adding your partner or spouse as a shareholder of your limited company can be beneficial as they are also entitled to take money out of the company through dividends. However, we always recommend that you speak to an accountant before adding another shareholder to your company as in some cases it could be seen as ‘income shifting’. If you do decide that you want to add a shareholder your new shareholder must be involved in the company in some way, even if it is simply completing administration tasks on your behalf.
This article was provided by Easy Accountancy.